Rupee rises on investment hopes

The rupee rose, extending its rebound from a record low reached last week, on speculation an auction of debt-purchase quotas to foreign investors this week would spur investment inflows from abroad.

The currency strengthened the second time in three days before the Securities and Exchange Board of India allocates limits that would allow a total $10 billion investment in local- currency bonds. The Bloomberg-JPMorgan Asia Dollar Index, tracking the region’s 10 most-active currencies excluding the yen, gained after a report showed US retail sales surged 16 per cent to a record over the Thanksgiving weekend, easing concerns about the global economic recovery.

“The market is expecting some inflows from the bond quota auctions this week,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd in Mumbai. “A lot though would depend on news from the US and especially Europe. This would have a significant impact on the currency.”

The rupee advanced 0.6 per cent to 51.9650 per dollar in Mumbai, according to data compiled by Bloomberg. It fell 1.8 per cent last week, touching a record low of 52.7300 on November 22. Three-month offshore forwards traded at 52.87 to the dollar, compared with 53.28 on November 25. Forwards are agreements to buy or sell assets at a set price and date.

BONDS END MIXED
Government securities ended mixed with downward bias on some selling by banks and companies. The 9.15 per cent government security maturing in 2024 dropped further to Rs 101.3550 from Rs 101.47 last weekend, while its yield inched up to 8.97 per cent from 8.96 per cent.

The 8.79 per cent government security maturing in 2021 also declined to Rs 99.75 from Rs 99.85, while its yield improved to 8.83 per cent from 8.81 per cent previously. The 8.30 per cent government security maturing in 2040 too lost to Rs 90.56 from Rs 90.65, while its yield edged up to 9.24 per cent from Rs 9.23 per cent. The 8.28 per cent government security maturing in 2027 rose to Rs 92.82 from Rs 92.65 and the 8.13 per cent maturing in 2022 also firmed up to Rs 94.89 from Rs 94.85 while the 7.83 per cent maturing in 2018 held stable at Rs 95.3150.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 89,995 crore from 36 bids at a one-day repo auction for a fixed 8.50 per cent and sold securities worth Rs 25 crore from two bids at a one-day reverse repo auction at a fixed of 7.50 per cent.

CALL RATE DECLINES
The call rate slipped on the overnight call money market on Monday on increase in liquidity in the banking system. The overnight rate closed lower at 8.65 per cent from last Friday's close of 8.70 per cent.